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Bad news from Europe for makers of life-saving medical devices

In over eight years, we’ve never before blogged about a European development in prescription medical product liability. The (relatively) recent decision by the Court of Justice of the European Union (“CJEU”) in Boston Scientific Medizintechnik GmbH v. AOK Sachsen-Anhalt - Die Gesundheitskasse, Nos. C‑503/13, -504/13, slip op. (4th Chamber March 5, 2015) (that’s a mouthful, so we’ll call it “BSMG” for short), causes us to make an exception.

First, a bit about the court. According to the EU’s website, one of the functions of the CJEU is to “interpret[] EU law to make sure it is applied in the same way in all EU countries.” So this is essentially the highest EU court for all matters governed by EU legal directives. Wikipedia adds that the CJEU almost always sits in “chambers” – units of less than the whole – so the “Fourth Chamber” designation is as far as this case is going to go, since it was not assigned to the en banc “Grand Chamber” at the outset. Thus the BSMG decision is a final, high-court legal interpretation that will apply throughout Europe.

BSMG interpreted “Directive 85/374/EEC,” id. at ¶1, which is the general EU product liability directive enacted back in 1985. WhileBSMG involved medical devices, the decision rests entirely on the general product liability directive, and does not even reference the later EU directive for medical devices, Directive 93/42/EEC. To us, that’s the first takeaway from BSMG – since it is based entirely on the general product liability directive, it could potentially apply to any product: prescription drugs, or even automobiles, presenting the same sort of acute risks at issue in the decision.

The important facts are these. BSMG is actually two cases, both brought by European third party payors (“TPPs”) seeking reimbursement of medical costs that they incurred as a result of “defective” medical devices – and not just any medical devices, electronically operated implants, specifically pacemakers and implantable cardioverter defibrillators. Thus, these devices were both: (1) life sustaining, and (2) presented life threatening risks should they fail to function properly. The risk of potential fatal consequences were extremely important to the opinion.

The question that the CJEU answered in BSMG was how to prove “defect” under the product liability directive in (at least) cases involving these products. The general definition of “defect” in the directive is what we would call a “consumer expectation” test in the USA – the product “does not provide the safety which may reasonably be expected, taking all circumstances into account.” BSMG ¶10 (quoting ¶3(1) of the EU product liability directive).

The most important facts of BSMG were the manufacturer’s product-related communications.

As to the pacemakers, the manufacturer sent a recall letter stating that a “component” could “experience a gradual degradation” causing “premature battery depletion” that could cause the device to stop functioning “without warning.” The manufacturer’s letter “recommended physicians to consider,”inter alia, replacement, and offered free replacement units for any affected pacemakers even if the warranty had expired. Id.¶¶14-15.

As to the defibrillators, there was no recall. Rather, the problem identified in the manufacturer’s communication was the possibility of a “stuck” magnetic switch that “could limit the device’s therapeutic efficacy.” If this device were in “enable magnet use mode,” a sticking switch could cause it not to activate when defibrillation was called for. The manufacturer’s fix was “to deactivate the magnetic switch.” Id. ¶¶19-21.

In both cases, the plaintiff TPPs paid for replacement surgeries undertaken in response to the communications. Id. ¶¶16-17, 22-23. They sued to recover these expenses. Id. ¶¶17-18, 22-23.

The explanted pacemakers “were destroyed without any expert opinion being obtained on their functioning.” Id. ¶16. There is no mention of the fate of the explanted defibrillator, but neither didBSMG mention any expert opinions concerning that device.

BSMG adopted a notably plaintiff-friendly standard for proving defect, in situations where the defendant manufacturer had discovered and publicized potentially life-threatening product-related problems. “[I]n the light of their function and the particularly vulnerable situation of patients using such devices, the safety requirements for those devices which such patients are entitled to expect are particularly high.” Id. ¶39. How high? The CJEU doesn’t say directly, but it did include what the lower court had held on this subject:

That court considers that, in that context, it is of little consequence . . . that it is not possible for a pacemaker or a cardioverter defibrillator that has been implanted to be 100% safe. In view of the life-threatening risk presented by a defective device, the patient may, in principle, reasonably expect the implanted device to have a failure rate of close to zero.

Id. ¶26. Conversely, the decision nowhere mentions the extensive warnings that we assume must have accompanied these sophisticated medical devices. Were warnings also of “no consequence”? Is so, the opinion approaches absolute liabilty, regardless of warnings, simply because of the high degree of risk.

We’ve never seen a consumer expectation test divorced from product warnings before, but as we mentioned at the outset, this is our first post about European law. Nor does BSMG mention the prescribing surgeons to whom device warnings are directed, instead focusing only on “the reasonable expectations of the public at large.” Id. ¶37. That’s another alarmingly pro-plaintiff aspect of BSMG – creation of a consumer expectation vacuum in which the concept that we call “learned intermediary” in the United States is neither mentioned nor, apparently, even considered.

The more we read the BSMG decision, the worse it gets.

The court further opined that the nature of these devices meant that “the potential lack of safety which would give rise to liability” also gave rise to an “abnormal potential for damage.” Id. ¶40. Thus, the CJEU found no need to determine “defect” on an item-by-item basis:

[W]here it is found that such products belonging to the same group or forming part of the same production series have a potential defect, it is possible to classify as defective all the products in that group or series, without there being any need to show that the product in question is defective. . . . [S]uch an interpretation is consistent with the objectives . . . in the preamble to Directive 85/374, [of] a fair apportionment of the risks inherent in modern technological production between the injured person and the producer.

Id. ¶¶41-42 (emphasis added). Therefore, the 1985 product liability directive “must be interpreted as meaning that, where it is found that products belonging to the same group or forming part of the same production series . . . have a potential defect, such a product may be classified as defective without there being any need to establish that that product has such a defect.” Id.¶43. SeeId. ¶56(1) (restating “where it is found that products belonging to the same group or forming part of the same production series, such as pacemakers and implantable cardioverter defibrillators, have a potential defect, such a product may be classified as defective without there being any need to establish that that product has such a defect”).

Thus, BSMG held that under at least “life-threatening” circumstances a defect in any one unit of a mass-produced “group” or “production series” may be inferred from a “potential defect” shared by the group or series as a whole. The “possib[ility],” id. ¶41, of collective defect based solely on degree of risk now exists throughout the EU.

The CJEU went on to hold that device replacement surgery was recoverable damage as long as “there is a causal relationship between the defect and the damage suffered.” BSMG ¶¶47-50. Since the court viewed the defendant manufacturer’s recall letter – establishing the “defect” − as recommending replacement of the pacemakers, that cost became ipso facto recoverable. Id.¶¶51-52. Conversely, since replacement went beyond what the manufacturer had stated was necessary with respect to of defibrillators, that case was remanded to the lower (“national”) court for determining “whether, having regard to the particularly vulnerable situation of patients using [the device], the deactivation of the magnetic switch is sufficient for the purpose of overcoming the defect in that product, bearing in mind the abnormal risk of damage to which it subjects the patients concerned, or whether it is necessary to replace that product in order to overcome the defect.” Id. ¶54.

BSMG therefore allows, but does not make mandatory (the language is “is possible”/”may be”) the collective determination of defectiveness for an entire product “group” or “production series” without the need for any examination of individual products at all. Certain factors affect whether collective defect is allowed in any given case. These are the “function” of the product, the “particularly vulnerable situation” of the product user, and product failure having an “abnormal potential for damage.” Here, the “function” was to sustain life, the “particularly vulnerable situation” was that the implanted product could not be easily checked, and the “abnormal potential for damage” involved risk of death.

The causation language of BSMG also makes clear that it matters what the manufacturer admits about the nature of the defect. Where there is an outright recall, for reasons indicating a defect that (supposedly) supports replacement in all cases, then the decision’s theory of collective defect produces “defect” findings seemingly as a matter of course. Short of that, however, plaintiffs must prove that the defect caused the claimed injury, as was the case with the defibrillator in BSMG.

To us Yanks, steeped in a totally different legal system, this form of liability appears radical. It is as if courts were allowed to use single issue class actions to determine “defect” for everyone using a product “group” or “production series” based on an abstract risk assessment, and then to decide the defect question by giving conclusive effect to what the manufacturer admitted in an out-of-court statement about the product. Come to think of it, will European class action rules (in those countries permitting class actions) allow plaintiffs to exploit BSMG through aggregate litigation? Defect and causation are the primary individualized issues that, at least in the United States, have kept class actions out of product liability. BSMG indicates that in the EU this isn’t so, at least where the risks are “abnormal[ly]” high.

Similarly, the prospect that juries can reach differing views on defect and causation are key reasons why collateral estoppel is almost never applied offensively against a product manufacturer after the first of possibly many plaintiffs prevails in proving a product defect. Some of the language in BSMG sounds a lot like offensive collateral estoppel to our ears: where “it is found” that one unit of “products belonging to the same group or forming part of the same production series” has “a potential defect, such a product may be classified as defective without there being any need to show that that product is defective.” Id. ¶56(1). Maddeningly, BSMG twice uses (¶¶43, 56(1)) the passive voice – “it is found” – at this crucial juncture. Found by whom? BSMGinvolved the European version of “Dear Doctor” letters in which the manufacturer recognized potentially fatal risks, but the holding subsumes this critical context into “it is found.” There are other ways that a fact-finder may conclude a product is defective, such as individual adjudication. Because BSMG resorted to the passive voice, it leaves open the possibility that, even without any arguable affirmative manufacturer statements, a defect finding in an individual case, if involving a comparably serious risk, might also be advanced as grounds for holding the entire “group”/”production series” defective, what us Yanks call offensive collateral estoppel.

Issue classes and offensive collateral estoppel are thus inside the Pandora’s Box that BSMG leaves ajar for future EU cases involving products whose “function” creates an “abnormal potential” to harm “particularly vulnerable” product users. Liability for a product unfortunate enough to be adjudicated as within this category can extend automatically to every user in the class. Product spoliation? Who cares anymore – the CJEU certainly found the missing pacemakers were no bar to liability. We remind readers that BSMG involved TPP suits to recover subrogates medical costs, not suits by consumers alleging personal injury. However, without that distinction being mentioned in the court’s holding, the decision’s rationale could potentially do away with a plaintiff’s burden of showing defect in a personal injury case, leaving the plaintiff with only causation to prove. We doubt the court ever considered these questions − demonstrating the need for PLAC-like sophisticated amicus curiaeorganizations in the EU.

One thing is for sure: companies making medical devices similar in “function” (electronically operated) and “abnormal potential” (being used to sustain life) for harm should pay a lot of attention to how their physician correspondence is worded – as if such companies don’t already. Is the risk potentially fatal? ThenBSMG is likely to apply. Further, as BSMG demonstrates, a manufacturer’s replacement recommendation is likely to be read broadly, particularly where the risk is life-threatening. Anything over-inclusive creates the possibility of a conclusive defect finding to the extent of the “group”/”series.”

Causation can also be affected. Comparing the two communications in BSMG, it is apparent that recalls are most at risk (that risk being quite high) of a collective defect finding. Recommendations for lesser steps will present correspondingly lesser threat of a collective defect finding. Thus, BSMG creates the perverse policy result of punishing, and thus deterring, product recalls. Further, manufacturers communicating with doctors (or anyone) should be careful to distinguish between manufacturing defects (peculiar to the manufacture of an individual product unit) and design defects, since the latter are now potentially subject to a single defect finding extending to all products in that “group” or “series.” Another thing to consider is whether a lesser recommendation, such as “to monitor” rather than “replace,” could give rise to classwide medical monitoring litigation after BSMG. Could BSMG touch off the EU equivalent of heart valve litigation with uninjured but at-risk plaintiffs?

BSMG also leaves open questions as to its scope. Is it limited to situations involving arguable “life-threatening” risks identified in manufacturer correspondence? The court seems to be holding that no consumer “reasonably expects” that medical device risks can be fatal – hence our fear of absolute liability for such risks. If limited to that situation, BSMG could be – analogously to theEngle cigarette litigation in Florida − a very graphic demonstration of bad facts making bad law. The problem is that life-threatening risks go together with life-sustaining products. If manufacturers are required effectively to insure such risks, regardless of warnings, keeping such devices on the market may not make any economic sense.

And what if not? Can the BSMG collective defect holding be limited to electronic implants immediately necessary to sustain life, such as the pacemakers and defibrillators at issue? What about electronic implants not immediately necessary to sustain life, such as deep brain stimulators, blood sugar monitors, or pain pumps? Is device inaccessibility a proxy for “patient vulnerability”? What about non-electronic implants that sustain life and can’t be removed for inspection (artificial heart valves) or that can be inspected (dialysis machines) or that can’t easily be removed but don’t sustain life (various prostheses/joint replacements). This depends on how far “abnormal potential for danger” is extended in subsequent cases past the BSMG situation of a product intended to keep a human heart beating. The decision is particularly troubling due to the vague factors it employs and its passive voice failure to anchor the ruling in a bigger product liability picture. Liability as extensive as that suggested in possible broader ways of reading BSMG may result in an EU “pace mexit” (now that Grexit doesn't seem as imminent).

Moreover, remember what we pointed out at the outset. BSMG is an interpretation of the EU’s general product liability directive. Another imponderable is how far does the decision extend to other products? Obviously, prescription drugs are at most potential jeopardy. Plaintiffs may try arguing that any products requiring a physician’s prescription are being used by “particularly vulnerable” persons. Some prescription drugs – ironically the most valuable to their users – sustain life just as surely as the medical devices at issue in BSMG. What about other products? Medical device manufacturers aren’t the only manufacturers who have to issue recall notices. Are airbags any different in terms of risk (potentially fatal) and function (life-saving)?

Finally, what about insurance/excess insurance? Does collective defect liability also create a single “occurrence”?

We here at DDlaw spend a lot of time complaining about how poorly the American system of civil justice operates in prescription medical product liability litigation. BSMG is a reality check for us – a reminder that, as bad as things are, they could be worse.

Compare jurisdictions: Arbitration

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